Euro Rebounds Despite Soaring Spanish Yields, US GDP Rev Next

Spanish short term auction sees soaring yields; IMF&EU confirmed Hungarian request for financial assistance; UK public sector borrowing lower. Market turns to Q3 GDP revision, Canadian retail sales and FOMC minutes are due. EURUSD & EURGBP longs hit targets.

USD is slightly weaker in the ongoing session as EURUSD trades above 1.3550. CHF and EUR are the relative strength winners today. Major European equities are higher by about 0.5%.

Despite the new Spanish government that promised to cut deficit and promote growth, Spanish treasury had to pay higher yield today to sell almost EUR 3 bln in short term bills. The average yield on 3 month bill was 5.11% up from previous 2.29% and on 6 month bills the average yield was 5.22% from 3.3% both thus reached the highest points since euro inception. However, 10 year yields (IT, SP, FR) have declined today slightly.

A confirmation that the current crisis is not confined to the Eurozone came as IMF and the European commission confirmed that they had received a request for "precautionary" financial assistance from Hungary which is a member of the European Union. This assistance is meant to secure Hungarian ability to obtain funding in the markets. Hungarian Forint belonged to the worst performing currencies over the past three months but surprisingly, it has been strengthening since Thursday last week.

UK public sector net borrowing was lower than expected when it printed GBP 3.4 bln in October from GBP 10.2 bln in September. Public borrowing continues to be on target for this fiscal year but additional deficit reduction might be more difficult given the weak growth projections. GBPUSD has been on a rollercoaster today as it first dropped from 1.5691 to 1.5622 only to quickly recover back to 1.5680.

The NY session will kick off at 8:30 am with the second estimate for the annualized Q3 GDP that is seen at 2.5%, unchanged from the initial estimate. As this is the second estimate, the impact is likely to be limited.

Canadian September retail sales are also due at 8:30 am and are expected to keep the same pace of growth and print 0.5%. Core retail sales are seen at 0.4%.

Eurozone consumer confidence is due at 10:00 am and should remain unchanged at -20 in November. Readings below 0 continue to express pessimism among consumers.

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Minutes from November FOMC meeting are due at 2:00 pm but considering the press conference after the actual FOMC decision, the chance of any surprising insights that could notably impact the markets is slim.